What are the UK inheritance tax changes affecting pensions?

Reports indicate that from April, unspent private pensions could be counted within an estate for inheritance tax. Combined with frozen thresholds, more middle-income families may be drawn into scope. The OBR projects 9.3% of deaths paying by 2030–31. Savers should review nominations, drawdown choices, and overall estate plans.

Will the middle class pay more inheritance tax under these rules?

Yes, the middle class tax burden is likely to rise as frozen thresholds and the inclusion of unspent pensions bring more modest estates into the net. While more estates may pay, average bills could fall as smaller estates are captured. Families should model likely liabilities and prepare liquidity for heirs.

How might investors respond to pension inheritance tax changes?

We expect increased demand for estate-planning advice, protection insurance to cover potential tax, and targeted use of tax wrappers. Some may consider Business Relief assets, with careful due diligence. Portfolio withdrawals, gifting strategy, and pension drawdown timing will become more important to manage risks and preserve options for heirs.

Are Business Relief assets still viable after April?

They may remain part of planning, but reliefs are set to be pared back from April, so due diligence is crucial. Investors should confirm qualifying status, fees, and liquidity, and avoid rushed allocations. A staged approach, clear exit plans, and professional advice can help manage rule changes and product risks.

Law and Government

UK Inheritance Tax on Pensions: February 19 – Middle-Class Hit Looms

ByDanny Kontos February 19, 2026February 19, 2026

UK inheritance tax changes are set to reshape pension planning in Britain as of 19 February 2026. With thresholds frozen and proposals to count unspent private pensions from April, more middle-income estates look exposed. The Office for Budget Responsibility projects 9.3% of deaths paying by 2030–31, with average bills falling as smaller estates enter the net. We explain what this means for families, pension savers, and investors, and where we may see shifts across wealth managers, insurers, and estate-planning solutions.